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Photographic 

Sciences 
Corporation 


23  WeST  MAIN  STREET 

WEBSTER,  N.Y.  14580 

(716)  872-4S03 


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CIHM/ICMH 

Microfiche 

Series. 


CIKM/!CMH 
Collection  de 
microfiches. 


Canadian  Institute  for  Historical  Microroprodiictions  /  Institut  canadien  de  rriicroreproductions  historiques 


Technical  and  Bibliographic  Notes/Notes  techniques  et  bibliographiques 


The  Institute  has  attempted  to  obtain  the  best 
original  copy  available  fcr  filming.  Features  of  this 
copy  which  may  be  bibi^ographically  unique, 
which  may  alter  any  of  the  images  in  the 
reproduction,  or  which  may  significantly  change 
the  usual  method  of  filming,  are  checked  below. 


D 


□ 


:l 


D 


Coloured  covers/ 
Couverture  He  couleur 


I      I    Covers  damaged/ 


Couverture  endommagie 

Covers  restored  and/or  laminated/ 
Couverture  restaurde  et/ou  pellicul6e 

Cover  title  missing/ 

Le  titre  de  couverture  manque 

Coloured  maps/ 

Cartes  giographiques  en  couleur 

Coloured  ink  (i.e.  other  than  blud  or  blacki/ 
Encre  de  couleur  (i.e.  autre  que  bleue  ou  noire) 

Coloured  platea  and/or  illustrations/ 
Planches  et/ou  illustrations  en  couleur 

Bound  with  other  material/ 
Reli4  avec  d'autres  documents 


Tight  binding  may  cause  shadows  or  <jistortion 
along  interior  margin/ 

L&  reliure  se'r^e  peut  causer  de  I'ombre  ou  de  la 
distortion  le  long  de  la  marge  int6rieure 

Blank  leaves  cdded  during  restoration  may 
appear  withir:  the  text.  Whenever  possible,  these 
have  been  omitted  from  filming/ 
II  se  peut  que  certaines  pages  blanches  ajouties 
lors  d'une  restauration  apparaissent  dans  le  texte, 
mats,  lorsque  cela  dtait  possible,  ces  pages  n'ont 
pas  6t6  fitmdes. 

Additional  comments:/ 
Commcntaires  suppl6mentaires: 


L'Institut  a  microfilm^  le  meilleur  exemplaire 
qu'il  lui  a  6t6  possible  de  se  procurer.  Les  details 
de  cet  4xemplacre  qui  sont  peut-Atre  uniques  du 
point  de  vue  bibliographique,  qui  peuvent  modifier 
une  image  reproduite,  ou  qui  peuvent  exiger  une 
modificetion  dans  la  mdthode  ncrmale  de  filmage 
sont  indiquds  ci-deseous. 


I      I    Coloured  pages/ 


Pages  ds  couleur 

Pages  damaged/ 
Pages  endommagdes 

Pages  restored  and/oi 

Pages  restaurdes  et/ou  pellicul6es 


r~l    Pages  damaged/ 

I      j    Pages  restored  and/or  laminated/ 


y 


Pages  discoloured,  stainod  or  foxed/ 
Pages  ddcclorees,  tachet^es  ou  piqu^es 


U    Pages  detached,' 
Pages  o^tachdes 

j      I    Showthrough/ 


Transparence 

Quality  of  prir 

Quality  indgale  de  I'imprassion 

Includes  supplementary  materii 
Comprend  du  material  supplirnentaire 

Only  edition  available/ 
Seuie  6diticn  disponible 


T 
t( 


I      I    Quality  of  print  varies/ 

□    Includes  supplementary  material/ 
C 

I     I    Only  edition  available/ 


D 


Pages  wholly  or  partially  obscured  by  errata 
slips,  tissues,  etc.,  have  been  ref limed  to 
ensure  the  best  possible  imagb/ 
Les  pages  tot&lement  ou  partiellement 
obscurcies  par  un  feuillet  d'errata,  une  pelure, 
etc.,  ont  6t^  film^es  A  nouveau  de  faqor*  A 
ubtenir  la  meilleure  image  possible. 


T 

P 
o 

fi 


C 
b 
tl 

si 
o 
fi 
si 
o 


T 
si 

T 

U 
di 
ei 
bi 
ri< 
re 
m 


This  item  is  filmed  at  the  reduction  ratio  checked  b'oiow/ 

Ce  document  est  filmA  au  taux  de  reduction  indiquA  ci-dessous. 

10X  14X  18X  22X 


26X 


30X 


7 

>-  - 

12X 


y%K 


TSXa 


24X 


28X 


n 


32X 


The  copy  filmed  here  has  been  reproduced  thanks 
to  the  generosity  of: 

Library  of  the  Public 
Archives  of  Canada 


L'exemplaire  fiimd  fut  reprodult  grdca  h  la 
g6n6rosit6  de: 

La  bibliothdque  des  Archives 
publiques  du  Canada 


The  images  appearing  here  are  the  best  quality 
possible  considering  the  condition  and  legibility 
of  the  original  copy  and  in  keeping  with  the 
filming  contract  specifications. 


Original  copies  in  printed  paper  covers  are  filmed 
beginning  with  the  front  cover  and  ending  on 
the  last  page  with  a  printed  or  illustrated  impres- 
sion, or  the  back  cover  when  appropriate.  All 
other  original  copies  are  filmed  beginning  en  the 
first  page  with  a  printed  or  illustrated  impres- 
sion, and  ending  on  the  last  page  with  a  printed 
or  illustrated  impression. 


The  last  recorded  fraitie  on  each  microfiche 
shall  contain  the  symbol  ■— ^•(meaning  "CON- 
TINUED"), or  the  symbol  V  (meaning  "END"), 
whichever  applies. 

Maps,  plates,  charts,  etc.,  may  be  filmed  at 
different  reduction  ratios.  Those  too  large  to  be 
entirely  included  in  one  exposure  are  filmed 
beginning  in  the  upper  left  hand  corner,  left  to 
right  and  top  to  bottom,  as  many  frames  as 
required.  The  following  diagrams  illustrate  the 
method  : 


Les  images  suivantes  ont  M6  reproduites  avec  le 
plus  grand  soin,  jompte  tenu  de  ia  condition  et 
de  la  nettet6  de  l'exemplaire  film6,  et  en 
conformity  avec  les  conditions  du  contrat  de 
filmage. 

Les  exemplaires  originaux  dont  la  couverture  en 
papier  est  imprimis  sont  filmds  en  commenpant 
par  le  premier  pjat  et  en  terminant  sol:  par  la 
dernidre  page  qui  comporte  una  empreinte 
d'imprespion  ou  d'illustration,  soit  par  le  second 
plat,  salon  le  cas.  Tous  les  autres  exemplaires 
originaux  sont  film6s  en  commenpant  par  la 
premidre  page  qui  comporte  une  empreinte 
d'impression  ou  d'illustration  e:  en  terminant  par 
la  dernidre  page  qui  comporte  une  telle 
empreinte. 

Un  des  symboles  suivants  apparaitra  SMr  la 
dernidre  image  de  cheque  microfiche,  selon  le 
cas:  le  symbole  — •►  signifie  "A  SUIVRE",  le 
symbols  V  signifie  "FIN". 

Les  cartes,  planches,  tableaux,  etc.,  peuvent  dtre 
film6s  d  des  taux  de  reduction  diffdrents. 
Lorsque  le  document  est  trop  grand  pour  dtre 
reproduit  en  un  seul  clich6,  il  est  film6  d  partir 
de  Tangle  sup6rieur  gauche,  de  gauche  d  droite, 
et  de  haut  en  bas,  er:  prenant  le  nom^ire 
d'images  ndcessaire.  Les  diagrnmmes  suivants 
illustrerit  la  mdthode. 


1 

2 

3 

1 

2 

3 

4 

1 

S 

6 

''f0  i 


*.^l' 


SHORT  ROAD 


TO 


Spfxie— Currency. 


■  JWKW'qypwcwaw  » 


._/ 


KttSfi 


Mi-yriJopoLiTAN  National  Bank,  ) 
N  K  w  Y( )  1 :  K .  May  1 1 1  h ,  ^H74.  \ 

T<»    ITON.    J()IL\    SllKIIMAN, 

C//(fir/j/(f/f  ()f  Finance  Ctmuinlh'C, 
'  ir.  S.  Ornate, 
Dram  Si i;: 

SiiHM'  last  Noveml)t'r,  wlieii  yoii  tnlked  ovor  uitli  mo, 
liere,  Mh'  su])Je('t  of  13aiilviii<jr  and  (/tin'ency,  my  viows,  tlit'ii 
cxpicsscd,  liavt?  hceii  confiinu'd  and  strengthened.  Since 
then,  too,  the  ground  lias  been  (juiie  thoronghly  gone  over 
by  both  briinches  of  (^)ngress. 

The  recent  veto  of  tlu'  Sen:it(i  l)ill  by  Pi-esident  Orant, 
]>rings  lip  anew,  hovvevcu',  the  old^tn-'stions  :  ])t'rhaps,  under 
circumstances  more  favorable  for  a  calm  considerati<m  and 
wise  solution  of  the  whole  matter.  You  know,  sir,  that  in 
the  fire  and  smoke  of  battle,  we  often  lose  flight  of  our 
enemy  ;  so,  in  the  heat  and  excitement  of  debate,  there 
is  danger  that  we  mny  lose  siglit  of  the;  original  cause  of 
existing  differences,  and  conse(|uently,  fiiil  to  perceive  and 
apply  the  wisest  remedy. 

Will  you  allow  me  now.  to  state  my  mature  convictions 
on  this  all  important  sul)J(^ct?  Take  them  for  what  they 
are  worth,  intrinsically,  not  for  my  sake ;  and  let  them 
pei'ish,  if  rhey  do  not  possess  vitality  (Miough  to  deserve 
favor  in  public  estimation. 

In  the  general  discussion  of  this  subj(>ct,  it  has  seemed 
to  me,  that  the  j)nblic  and  Congress,  have  })een  too  much 
fettered  by  'precedent — by  clinging  to  what  has  been — by 
eft'orts  to  ]);itch  up  old  nn^thods — "  sewing  new  cloth  into 
,  old  garments,"  instend  of  hiying  the  ohl  garments  on  the 
slielf,  grateful  none  the  less,  for  the  good  they  have  done, 
but  knowing  we  had  outgrown  them — as  the  man  tin.'  boy's 
clothes—and  had  no  further  practical  use  for  them.  This 
we  hav(^  done,  in  estal)lisliing  our  own  form  of  Government| 
why  not  do  it  in  reference  to  ])()litical  economy  f 

Among  Mich  useless  antiquities,  may  be  classed,  "the 
Suifolk    l>i»nk   System,"    so   called,   which  was   the  most 


i««K--^iS(tW»« 


umnitiuatod  paper  scheme  ev<T  devisrd  ;  uiid«;rit,  tiiillionsof 
biiiik  bills  wen'  redeemed  without  using  a  dollar  of  speeie ! 
yet  tliut  did  good  service  I'fty  y<^ara  ago,  but  is  of  no  use 
now;  and  ;in  outgrowili  of  that—'' assorting  liouses"— still 
talked  of,  for  the  purpose  of  separating  the  bills  of  eaeh 
Bank  froin  all  others,  to  send  home  for  payment  in  other 
pa})er  promises !  And  most  pronun'Mit  of  all,  the  vain 
effort  to  r<'snme  s])ecie  payments  by  Banks,  as  lieretofoi-e, 
including  alike  bills  and  de])osits,  which  always  has  been, 
and  in  the  nature  of  things,  always  must  be,  sooniM-  or 
later,  a  failure.  "Free  Baidling,''  too,  is  a  catch-word, 
and  a  di^lusivc  snare,  for  it  would  give  too  much  or  too 
litth;  currency  —entirely  deixuident  on  the  protit  in  making 
it— cc'isequently,  'ausing  eith(?r  perturbation  or  stagnation, 
both  of  wliich  should  be  avoided. 

All  tlu^se  belong  to  the  oh'^olete^  and  time  will  be  saved 
by  so  C()nsidering  them.     Let  them  go. 

As  to  the  cause,  or  causes,  of  the  late  financial  panic,  I 
consider  it  undeniable  and  self  evident,  that  last  September, 
we  touched  bottom  in  our  currency-supply.  If  superabund- 
ant ten  years  before,  it  was  pioved,  to  a  demonstration,  to  be 
used  up  now.  V^arious  circumstances,  splendid  railroad 
schemes  aiul.  other  inagniticiMit  projects,  no  doubt,  absorbed 
capital  and  precipitated  the  event.  But  the  simj^le,  naked 
truth  remains  undeniable,  neither  for  love,  nor  hard  money, 
itself,  could  more  currency  be  obtained.  There  was  an  abso- 
lute curveucv  famine,  and  some  starved  !  The  United  States 
had  undertaken  to  supply  the  country  but  tailed  to  do  it ; 
after  prohibiting  (wisely  I  think)  the  several  States  from 
authorizing  any  bank  circulation.  This,  and  this  alone,  was 
the  original  cause  and  starting  point  of  the  panic.  Hoarding, 
locking  up  in  merchants'  iron  safes,  came  afterwards,  as  one 
of  the  baneful  q/f'eHso^  tin;  fright,  and  it  gn^atly  aggravjited 
th(^  excitement.  The  banks  manfully  stood  by  each  other, 
and  lessened  the  disastrous  ei^'ects  by  the  course  they  pursued. 
Two  oi-  three  months  elapsed — the  wheels  of  trade  turned 
slowly,  but  surely,  and  the  return  of  currency  from  the  ex- 
tremes to  the  money-centres — with  the  necessary  contraction 
of  business  engagements — relieved  the  pressure  aiul  restored 
confidence.     But  not  until  serious  consequences  had  (msued, 


;-   1 


''^:t..  »;  litii-::;  yy 


which,  with  a  sufficient  supply  of  currency,  we  might  have 
been,  \v«'  sliould  have  been,  preserved  from. 

The  foregoing,  1  think,  are  among  the  essentials,  and  non- 
essentials, which  have  occupied  mucli  of  tli«'  lime  of  Congress, 
while  it  has  been  feeling  its  way  towards  light  on  this  im])or- 
tant  investigation.  But  time  spent  in  earnest  thouglit  is 
never  lost.  Especially  if  it  tits  us  to  seek  a  princlplt  on 
which  a  sysh'm  may  be  reared,  which  shall  meet  our  present 
wants  and  stand  the  strain  of  any  future  commercial  crisis. 

With  this  view  I  wou'd  suggest: 

Ist.  That  Congress  assume,  at  on(?e,  the  inherent, 
sovereign  prerogative  of  a  Government ''  of  th(.'  people,  by 
the  people,  and  for  the  people,"  and  exercise  it,  by  furnisli- 
ing  all  the  inhabitants  of  the  I'nited  States  with  a  uniform 
National  curren(!y  !  Surely  the  p(M)ple,  and  the  people  only, 
have  a  natural  right  to  all  the  advantages,  emolument  or 
income,  that  may  inure  from  the  issue  of  either  one  thousand 
dollar  bonds,  with  interest,  or  ten  dollar  notes  without, 
based  on  the  faith  and  credit  of  tlie  NaticMi !  '^ 

This  principle,  simple,  clear  and  und(^nial)le,  ought  to  be 
recognized  as  fundanieutal.  and  the  only  salt*  and  i)i()per 
basis,  on  which  may  securely  rest  all  the  circulating  medium 
of  the  country  ;  for  the  sole  benefit  of  all  the  })eople, 
and  not,  as  now,  for  the  profit  of  a  class  of  stockhold.^rs, 
however  deserving  they  may  be,  in  all  other  respects. 

2d.  To  carry  into  effect  this  principle — to  substitute  U.S. 
notes  for  Bank  notes— take  away,  as  soon  as  practical)le, 
and  forever,  all  ci rculation  from  ban ks.  Withdraw  National 
Bank  notes,  and  in  lieu  thereof  issue  U.  S.  Coin  Notes  (not 
legal  tenders),  as  fast  as  the  Bank  notes  can  be  n^turned  to 
the  issu(^  Department  at  Washington.  Such  substitution, 
would  of  course,  be  neither  contraction  nor  expansion,  but 
merely  {)utting  one  note  in  circulation  in  place  of  another ; 
consequently,  it  could  cause  no  business  jar  whatever. 

Let  the  United  States  purchase  the  bonds — now  lodged  in 
^Vashington,  to  secure  the  circulation  of  Banks-  at  the  market 
})rice,  or  at  least  a  sufficient  amount  of  thenij  to  cover  the  issue 
of  notes  hj  the  United  States  to  the  several  Banks,  for  ])ay- 
ment  of  their  bonds,  to  the  amount  of  Bank  notes  cancelled. 

*  N.  B.    It  is  a  sigtilflcant  fact,  that  within  ten  days,  the  London  Times  hue  suggested  the 
same  idea— that  in,  that  our  government  furnish  a  currency  for  the  country. 


A 


And  to  facilitate  the  ])roce8S,  require  that  at  least  25 
percent,  of  the  circulatioTi  of  each  Hank  be  annually  sur- 
rendered for  exchange  and  cancellation. 

'M.  The  new  notes,  and  legal  tenders,  now  outstanding, 
shall  be  redeemed  in  specie,  on  (banand,  whenever  presented 
at  the  Assistant  Treasurer's  Office  in  New  York  City.  To 
ensure  which,  Gri.v^ernment  shall  accumulate  (and,  if  need 
be,  sell  1(H)  million  five  per  cent,  bonds  to  accomplish  the 
pur})ose)  at  least  one  hundred  and  fifty  million  dollars  in 
specie,  in  the  vaults  of  said  Assistant  Treasurer,  and  aim  to 
retain  that,  as  a  minimum  amount,  at  all  tinu>s,  to  inspire  con- 
fidence and  provide  for  contingencies.  Nor  need  any  diffi- 
culty be  ap])rehended  on  this  ])oint,  as  (California  yielded  last 
yea-  up  to  81st  December,  seventy  two  million  two  hundn'd 
and  fifty-<'ight  thousand  dollars.  Moreover,  as  soon  as  the 
]>ul)lic  understand  they  can  have  s])ecie  for  the  asking,  it  will 
not  be  wanted.  People  will  prefer  to  carry  U.  S.  notes  in 
their  pockets,  as  more  convenient  and  equally  valuable. 

Neither  could  any  one  reasonably  obj«»ct,  that  the  Unit  'd 
States  would  be,  by  su(;h  an  o])eration,  banking  or  engaging  in 
business,  for,  pro])erly  regarded,  it  is  as  much  a  function  of 
Government,  as  the  drawing  of  a  Treasury  Draft  on  the  Assist- 
ant Treasurerjn  New  York;  indeed, practically,  it  is  only  that. 
4th.  To  guard  against  undue  issue,  on  the  part  of  the 
United  States,  antl  to  provide  in  summer,  when  money  is 
cheaj),  for  a  necessary  surplus  of  currency  to  transact  the 
autumn  business.  Congress  should  authorize  the  emission  of 
a  convertible  and  re-convertible  bond,  bearing  3,  4,  or  even 
f)  per  cent,  interest.  Said  bonds  to  be  obtained  either  of  the 
Assibtant  U.  S.  Treasurer,  in  New  York,  or  of  a  Commis- 
sion, appointed  to  take  charge  of  the  same,  at  the  office  of 
said  Treasurer,  upon  paying  for  them,  in  either  National 
Bank  notes,  legal  tenders,  or  11.  S.  notes.  And  the  bonds 
should  be  payable  at  the  office  of  said  Treasurer,  with 
accrued  interest,  on  demand,  at  the  option  of  the  holder. 

The  effect  of  this  emission  of  bonds,  would  be  two-fold  : 
first,  to  check  any  excessive  issue  of  U.  S.  notes,  as  they 
would  at  once  be  taken  to  the  Assistant  Treasurer  and  con- 
verted ipto  bonds,  thus  placing  such  excess  on  interest,  as  fast 
as  the  n'otes  became  superabundant ;  secondly,  these  bonds 


would  take  \)  circulation  when  cheiip — and  not  wantM  for 
business  purjjoses — and  k«'ep  it  till  it  was.  Then  the 
bonds  would  be  presented  foi  paynu'nt  and  the  circulation 
come  out  to  do  its  beneficent  work,  without  disturbing  the 
discount  lines  of  the  Banks,  as  the  operation  wcmld  be 
entirely  in(lep<*ndent  of  thetn.  Indeed  this  machine  would 
act  automatically  taking  up  or  letting  out  currency, 
according  to  supply  and  denumd. 

Should  money  be  abundant  and  cheap,  3  j)er  (rent,  bonds 
would  absorb  the  surplus  ;  but  so  important  is  it  to  accu- 
mulate money  in  July  and  August,  for  Septenib«,'r  and 
October,  that  even  f)  p(T  c<'nt.  for  00  or  90  days,  might  well 
be  paid,  on  20  or  'AO  millions,  rather  than  have  no  adequate 
pr(»vision  for  the  autumnal  demands  of  trade,  which  come 
round  with  the  regularity  of  trie  season. 

nth.  Here,  an  important  question  naturally  arises, 
namely  :  What  amount  of  currency  is  requisite  to  C(mduct 
the  enlarged  business  of  a  constantly  increasing  ])opulation, 
dealing  in  various  commodities  at  enhanced  prices  i 

This  question  may  be  practically  answered,  although 
nuithematical  certainty  may  not  be  attainable.  A  commis- 
sion carefully  selected,  would  be  able  to  reach  a  satisfactory 
result  in  this  particular  ;  and  also  to  ap})roximate'  the  per 
centageof  increase  of  currency  that  would  be  required,  every 
five  or  ten  years,  to  meet  the  growth  in  population  and  busi- 
ness ;  and  thus  escape  the  evil  of  either  deficiency  or  excess. 

For  instance,  if  with  a  population  in  18()1,  ot"S\i  millions 
— and  banks  paying  specie — we  had  a  Bank  note  circula- 
tion of  220  millions  —and  specie  in  circidation,  170  millions — 
aggregate,  390  millions — how  much  would  now  be  required 
for  a  population  of  43  millions,  including  demands  for  manu- 
factures, for  mining  the  precious  and  other  metals,  and  for 
railroads,  quadrupled  in  extent  in  thirteen  years  i  Allow- 
ance being  also  made  for  advance  in  prices  of  from  30  to  50 
per  cent.,  in  nearly  every  article  bought  and  sold. 

This  increase  in  values  is  real  and  not  nominal.  An 
effect  largely  owing  to  an  addition  of  specie  since  1848,  from 
Australia  and  California,  to  the  amount  of  hoo  thousand 
millions  in  gold  and  silver  !  The  commercial  exchanges 
of  the  civilized  world  have  thus  been  increased,  making 


'i 


8 


A 


^()l(l  and  silver,  Jind  not  paper,  responsible^ for tiu'cniin need 
value  of  commodities,  in  ail  countries,  even  where  there  has 
been  no  pa])er  used  as  currency. 

Thus  it  is  seen,  that  no  special  study  of  the  subject  is  re- 
quired to  pei-ceive,  that  double  the  former  volume  of  curroncy^ 
say  780  millions,  would  be  none  too  much  for  the  ])resentday. 
Nevertheless,  exactness  as  to  amount,  is  less  important 
tliJin  if  the  proposed  U.  S.  notes  were  not  to  he  paid,  on 
demand,  in  sjK'cie.  That  fa(;t,  complemented  by  the  converti- 
ble bonds,  would  r<'c^ulate  the  anu)unt  of  the  issue  of  I'.  S. 
currency  to  a  nicety  never  before  attained.  Especially,  as  these 
notes  would  noi  he  subjecttothelluctuationsincidentto  Bank 
note  circulation,  for  the  latter  must  always  be  more  or  less 
mixed  up  with  the  Bank's  liability  for  deposits,  and  depend- 
ent '^pon  the  availability  of  the  Bank's  discounted  })aper. 

Suppose  then,  for  example,  weassumeSuo  milliois  asthe 
requisite  amount  of  circulation  to-day. 

The  profits  of  that,  to  the  people,  may  be  thus  stated. 
Deducting"  150  millions,  as  anu)UMt  of  coin  to  be  kept  on  hand, 
would  leave  a  balance  of  ^50  millions  net,  to  draw  interest  as 
uHHiey.  This  sum  at  (5  per  cent,  would  yield  a  profit  of  HO 
ruillions  annually  !  Reducin<;  the  taxes  of  all  the  inhabi- 
tants, every  year,  exactly  that  amount,  compared  with  what 
would  oe  the  case,  if  that  circulation  were  given  up  to  J^anks. 
full.  Undoubtedly  there  are  a  few  Banks  that  will  raise 
a  cry  about  vested  rights,  violated  charters,  cS:c.,  but  it  is 
enough  to  say,  to  such,  that  any  Bank  which  cannot  live 
without  circulation,  must  have  less  of  the  confidence  of  the 
public,  as  evidenc'ed  in  de])0sits,  and  more  of  the  element 
on  which  wild-cat  banking  subsists,  thaniscompati))le  witli 
sound  commercial  Bank  manageiaent.  The  truth  is,  the 
proposed  change  is  not,  in  fact,  so  much  of  a  sacrific*.^  of 
profits,  as  at  first  sight,  it  may  seem  to  be.  You  know  that 
Banl^s  are  now  required  to  hold  live  per  cent,  bonds,  in- 
stead of  six,  as  the  i)asis  of  their  circulation  ;  the  rate  may, 
probably  wili,  be  reduced  to  four  per  cent. 

Then  the  Banks  would  be  relieved  from  all  taxes,  and 
reserves,  on  account  of  their  notes — and  here,  in  New  York, 
these  amount  to  about  three  per  cent,  per  annum.  They 
would  save  the  premium  on  U.  S.  bonds  deposited  in  Wash- 


0 


i!i<i:t<)n  for  ciiciiliitiou.  TIhv- would  (jscnpo  tlu'clainor  of 
nevvspa|)<Ms,  and  iiidividinils,  for  ivsiimpticui  of  |)ayrii('ntH 
in  Hpccic.  Koi',  then,  tliey  would  hank  on  li,  S.  notes  and 
sTH'cits  their  cust«>niei\s  receiving  wliiohever  they  preferred. 
Tn  a  word,  they  would  do  a  strictly  legitimate  ])usinesH  aH 
lianks  of  discount  and  (h'posit ;  knowing,  tliat  wliatever 
leads  to  tlie  prosperity  of  tlie  whole  ])eo])le,  must  be  benefi- 
cial to  tlie  baulks;  but  leaving  the  right,  where  it  belongs, 
to  tlie  V.  S.  (Tovernment,  to  supply  the  whole  circulating 
medium  of  the  country. 

While  I  speak  thus  strongly,  for  the  t)est  interest  of  all, 
as  I  understand  it,  1  beg  to  say,  that  no  one  can  enttMtaiji  a 
higher  estimate  of  the  usefulness,  the  integrity  and  tlu; 
honor  of  I)auk  managers  than  1  do  ;  and,  no  one,  I  believe, 
knows  til  em  be  iter. 

Yet,  in  this  connection,  we  must  lemember  that  Banks  are 
th(i  creatures  of  law.  The  laws  which  created  them,  may,  by 
virtue  of  rights  res(^rved,  be  amended,  .altered,  or  "epealed. 

If  therefore,  it  is  found,  that,  as  heietofore,  and  as  now, 
constitut(Ml,  tlu?se  instiiutions,  with  the  best  intentions  of 
those  who  d'  -ect  them,  fail  to  secure  for  the  people  a  satisfac- 
tory currency  ;  and  that  ev(*n  to  attemi)t  it,  on  the  old  basis, 
would  be  to  lay  themselves  open  to  as  frequent  suspensions 
as  Wall  Street  should  choose  to  inflict ;  then,  surely,  it  is 
fitting  and  ne  ilful  that  some  better  methods  be  d«n'ised  and 
carried  out.  To  those  who  are  disposed  to  complain  of  the 
change  as  a  hardship,  one  istempt(?d  to  ask  whiit  7ial7iral 
right  a  dozen  stockholders  have  to  receive  notes  from  Govern- 
ment to  circulate,  that  any  other  dozen  men  do  not  possess? 

7th.  Again,  some  may  say,  it  is  true,  we  need  reform,  but 
if  Wall  Street  is  so  powerful,  as  again-st  Bard<:s,  why  may  it 
not  have  equal  ability  to  cause  Government  to  sus})end  i 

The  reply  to  this  is  })lain  and  conclusive.  The  cases  are 
esseTitially  difi'erent.  Whenever  Banks  }iav(^  failed,  it  has 
always  been  because  of  the  withdiawal  of  their  deposits, 
and  not  that  a  few  thousand  dollars  were  demand<Ml  for 
their  bills — not  at  all — but  payment  of  deposits  waa 
demand(3d,  amounting,  perhaps,  to  ten  times  their  circula- 
tion, and  hence  the  banks  were  unable  to  respond.  This 
has  hioarlably  been  the  caus(>  of  tlu^  s(Heral  Bank  failures. 


I 


10 


How  unwise,  then,  nor  to  seek  a  sure  and  sufficient  remedy, 
aft<*r  trying  seventy-five  years  to  ^onipass  the  inipossibh.' ! 

N'ow,  innsmueliasthe  V.  S.  Government /^r/.v  no  (l('posUi<, 
and  its  circulating:  notes  wouhl  permeate  fvery  corner  of 
this  vast  country' — 'lowi^"  tfie  liglitf'nl  work  of  a  National 
currency — thercjfore,  tlic^y  could  not  bt«  hoarded — even  if 
the  attempt  were  made —in  any  quantity  sufficient  to 
derange  the  regular  basiness  of*  tlie  hujd.  'I'liey  would 
(!onstitut<%  so  to  sjx'ak,  the  lif '-blood  of  our  commercial  and 
niercaiitih'!  transactions,  circulating  to  the  lemotest  parts, 
and  equally  indispensable  at  the  centre  or  ihe  cir<'umf<*r- 
ence.  And  if,  by  labor  and  sacri lice  of  interest,  a  sum  could 
be  gathered  together,  what  motive  would  exist  to  den-and 
specie,  when  the  ])aper  wcs  of  equal  value  with  the  coin. 

Another  good  result  would  surely  he  accomplished. 
Speculation  in  gold  would  be  killed  stone-dead  !  aiul  that 
nuisance  abated,  most  etrectiuiliv. 

8th.  The  proposed  separation  of  circuhition  from  Banks 
of  discount  and  deposit,  would  (*stal)lish  banking  proper,  on 
a  legitimate  basis,  and  transfer  to  the  (Teneral  (fov-i-nment, 
when^.  it  belongs,  the  circulation  of  the  pr-ojile  fc  the  sole 
b<Miefit  of  all.  The  Hanks  and  U.  8.  (jrovernn.  ^nt,  !)oth 
working  harmoniously,  in  their  several  spheres,  with  no 
clashing  or  rivalry.  Indeed,  circulation  would  then  be 
scarcely  more  divorced  from  ordinary  banking,  than  now  ; 
inasmuch,  as  U,  S.  bonds,  deposited  in  Washington,  dis- 
tant, from  the  Banks,  now  compose  the;  security  for  the 
notes,  and  it  is  proposed  to  take  th«^  direct  promis)^  of  the 


Go 


vernment  in  the  new 


I' 


currency. 


This  principh^  is  recognized  and  acted  on  by  the 
Bank  of  l^^ngland.  That  institution  has  cut  off  the  Issue 
from  the  Discount  liepartmeut,  almost  as  comi)letely.  as  if 
it  were  another  cor])oration.       Why  should  not  we  imitate 


Euirland' 


s  exam 


pie 


•  at  impi'ove  upon  it,  f)y  giving  to  our 


forty-thrive  millions  of  inhabitants  (Ul  the  profits  to  be 
derive('  from  a  circulation  throughout  our  country,  instead 
of  sharing  it  witli  2,000  Banks,  estimated  to  have  some  three 
hu!?'lred  thousand  stockholders'!! 

New  England  States  tliat  hav(^  a  large  accumulation   of 
surplus  capital,  and  a  plenty  of  National   i^ardv  eurrem-y, 


'T» 


11 

may  be  iiidiflV'reiit.  or  cvcji  ()i)}H)sod,  to  an  iiirn^ase  of  cur- 
rency, of  any  kind ;  bur  Massacliiist^ttH  and  Uhod(3  Island 
sliould  renieniber,  that  notwithstanding-  all  their  abundant 
resources,  yet,  last  Septenjber.  their  mill-operatives  wera 
arnoni?  the  lirst  to  i'oresee  danger  and  feel  distress,  on  tlie 
stopjKige  of  the  factories  of  their  wealtliiest  manufacturers  ; 
maiidy,  because  no  currency  could  be  obtained  to  carry 
them  on  !  Nor  will  tliey  soon  foi-get  liie  alarm  created  by 
threats  to  run  on  the  Savings  Brinks  -their  very  riches  and 
careful  savings,  even,  heightened  the  danger  of  a  panic 
among  the  laborers  who  had  savings-deposits. 

This,  and  every  considej-aiion,  should  teach  the  East  to 
look,  with  frjitenuil  feeling  to  the  West  and  the  j^outh,  if  it 
would  aid  in  n>lieving  a  i)resSure  arising  from  want  of 
capital  and  currency,  there,  l)ut  which  no  longer  is  felt  at  the 
East  I  In  truth,  the  uu])r(>cedented  and  irrepressible  grov/th 
of  the  West,  in  population  and  productive  power,  indicates, 
also,  an  api)r(^,aching,  if  not  an  existing,  political  power, 
that  will  soon  speak  to  tiie  East  in  tones  distinctly  audible. 

And  now,  Mr.  Senator,  only  one  word  more;  if  you 
approve,  in  the  main,  of  the  foregeing  suggestions,  will  you 
do  me  the  favcr  to  draw  a  bill  embracing  them,  substan- 
tially, and  advocati;  its  passage  in  the  Senate  ;  Providing, 
that  the  law  take  full  effect  on  the  Fourth  of  July,  1870, 
making,  thus,  our  sec<>nd  and  linancial  declaration  of 
Independence! 

Bi^lieve  me,  sir. 

Yours,  witl)  much  respe(;t, 

J.  E.  WILLIAMS. 


LETTER  TO  THE 


Hon.  Sir   Francis   Hincks. 


t'. 


0 


f 

(i>:' 


;»: 


Mktropolitan  National  Baxk,  ) 
New  York,  March  26th,  1876.    f 

Hon,  Sir  Francis  Hincks, 

Montreal^  Canada, 

Bear  Sir  : 

Your  polite  letter  and  your  pamphlet  on  the  Bank  of 
England,  reached  me  in  due  course  of  mail ;  but  various 
engagements  have  prevented  an  earlier  acknowledgment  of 
your  kindness  in  sending  them. 

My  attention  had  been  called  to  the  report  of  your 
remark  —as  published  in  the  newspaper  you  refer  to— on 
the  subject  of  currency  and  banking.  I  have  read  your 
views  with  much  interest  and  instruction.  It  is  })articularly 
interesting  to  11  ud  a  gentleman  of  your  large  experience 
r^ady  to  place  himself  deliberately  in  so  advanced  and  en- 
lightened a  position,  before  the  public,  in  regard  to  this  all- 
important  subject.  You  certainly  are  not  one  of  those 
political  economists  "  v;ho  mistake  time-honored  prejudices 
for  axiomatic  truths."  I  am  gratified  too,  to  learn  that  you 
found  in  my  letter  to  Senator  Slierman,  much  that  you 
could  approve. 

Will  you  pardon  me  if  I  am  a  little  prolix  iii  consider- 
ing the  points  of  dilfei-ence  you  suggest  \ 

In  the  first  place,  however,  I  would  thank  you  for  the 
extract  from  Mr.  Gallatin,  which  you  give  in  the  following 
words:  "The  right  of  issuing  paper  money  as  currency, 
like  that  of  gold  and  silver  coin,  belongs  exclusively  to  the 
nation  and  cannot  be  claimed  by  any  individual." 

Now,  while  it  is  desirable  to  have  so  responsible  an 
endorser  as  Mr.  Gallatin,  there  are  others  and  equally  good 
authorities  on  this  point. 

Thomas  Jelferson,  in  a  letter  to  his  son-in-law,  Eppes, 
dated  June  24th,  1813,  recommended  the  issue  of  Govern- 
ment notes  instead  of  allowing  Bank  notes  to  be  circulated, 
giving,  at  the  same  time,  cogent  reasons  for  his  con- 
clusions. "And,"  says  Mr.  Buckner,  ''he  thus  fore- 
shadowed the  proper  monetary  system  of  the  country." 


t 


X 

i 


16 


John  C.  Calhoun,  also — than  whom  there  existed,  in  his 
day,  no  keener  intellect,  or  iiercer  advocate  of  State-right8 
— said,  in  his  speech  in  Congn^ss,  March  22d,  1888,  on  the 
Sub-Treasury  bill,  "  I  now  undertake  to  afTirm  positively, 
and  without  the  least  fear  that  I  can  be  answered,  what  I 
have  but  suggested,  that  a  paper  issued  by  Oovernment, 
with  the  simple  promise  to  receive  it  in  all  its  dues — leaving 
its  creditors  to  take  it,  or  gold  and  silver,  at  their  oi)tion 
—would,  to  the  extent  it  would  circulate,  form  a  perfect 
paper  circulation  which  could  not  be  abused  by  the  Govern- 
ment ;  that  would  be  as  st(»ady  and  uniform  in  value  as  the 
metals  themselves." 

Again,  said  Mr.  Callioun,  in  his  speech  in  Congress, 
Sept.  19th,  1839,  "no  one  can  doubt  but  that  the  Govern- 
ment credit  is  better  than  that  of  any  Bank — more  stable, 
more  safe.  Why,  then,  should  it  mix  it  up  with  the  less 
perfect  credit  of  those  institutions  ?  The  question  is,  not 
between  credit  and  no  credit,  as  some  would  have  us  be- 
lieve, but  in  what  form  credit  can  best  perform  the  functions 
of  a  sound  currency." 

Reposing  then  on  the  autliority  of  the  fathers,  the  friends 
of  a  sound,  but  i-adical  currency  reform,  need  not  be  dis- 
turbed with  doubts  and  fears,  or  the  oft  repeated  cry  of  the 
newspapers,  that'ring  the  changes  on  "broken  promises," 
"theory  versus  bullion,"  &c.,  &c.  Especially  when  it  is 
rem-embered  that  to  restore  the  old  system  would  be  to  in- 
vite certain  failure  and  disaster. 

Permit  me  now,  to  consider  the  points  of  difterence 
betv^en  us,  referred  to  by  you.  You  say,  "with  regard  to 
Mr.  vv'^illiams'  scheme  I  have  but  two  objections  :  First,  lie 
does  not  propose  that  his  notes  should  be  a  legal-tender. 
Surely  this  would  necessitate  the  holding  of  gold  in  large 
quantities  by  the  Banks  all  over  the  country."    •* 

The  fact  is,  I  first  wrote  legal  tenders,  but  on  reflection, 
altered  that  to  coin-notes.  For  two  reasons  :  (1)  there  is,  to 
say  the  least,  a  strong  prejudice  in  many  minds,  against 
our  paper  legal-tender.  It  savors  of  the  war,  is  regarded  as 
a  war-measure.  (2)  Then,  the  conflicting  decisions  of 
the  U.  S.  Supreme  Court,  as  to  the  constitutional  right  of 
CongTess  to  create  such  legal-tender,  seemed  to  me  another 


17 


objection.  For  these  reasons,  1  thought  it  expedient  to 
suggest  nothing  that  would  land  to  keep  alive  the  excite- 
ment incident  to  such  questions,  but  rather  endeavor  to  keep 
them  out  of  sight — if  possible,  extinguish  them. 

T  am  inclined  to  think,  there  would  practically  arise  no 
such  difficulty  as  that  which  you  apprehend.  Almost  any- 
where, such  amounts  of  specie  as  might  be  temporarily 
wanted  for  legal-tender  purposes,  could  be  easily  procured. 
For  the  simple  reason,  that  U.  S.  notes  payable  in  specie  in 
New  York  City,  would  be  generally  a  trifle  above  par  in 
an 3^  I)art  of  the  country. 

Exchange  on  New  York  is  always  in  demand,  excepting 
for  brief  periods  in  New  Orleans,  when  cotton  is  being 
largely  bought ;  or  at  prominent  points  at  the  West,  when 
heavy  shipments  of  grain  are  being  made.  Besides,  it 
sho^ild  not  be  overlooked  that  currency  is  remitted  to  the 
money-centres  at  less  cost  than  coin,  and  would  conse- 
quently have  the  preference. 

Nevertheless,  if  it  should  appe.ir  evident  in  the  course  of 
the  practical  working  of  any  new  scheme,  that  legal-tender 
notes  were  perferable  to  coin  notes,  then  it  would  be  advisa- 
ble to  try  them.  I  have  no  prejudices — I  only  seek  to  secure 
the  best.  Such  notes  might  be  made  legal-tender  every- 
where, except  at  the  office  of  redemption  in  New  York 
City — at  which  place  only  (for  obvious  reasons),  they  should 
be  payable  in  coin. 

The  case  you  cite,  of  the  notes  of  the  Bank  of  England 
being  a  legal-tender  all  over  England  and  Wales,  except  at 
the  Bank  in  London,  would,  by  analogy,  seem  to  commend 
most  favorably  a  similar  course  here. 

In  the  next  place  you  say,  "  Mr.  Williams  proposes  an 
issue  of  800  millions,  keeping  a  reserve  of  150  millions  in 
gold  and  650  millions  in  securities.  It  would  be  much  safer, 
in  my  opinion,  to  adopt  the  English  system  and  issue  say, 
400  millions  on  securities,  and  any  further  amount  on  gold. 
•*  *  *  *  I  think  800  millions  an  exaggerated  estimate 
for  a  convertible  currency." 

In  reply,  I  would  say,  one  or  two  essential  facts  should  not 
be  lost  sight  of.  First,  no  more  gold  should  be  kept  on  hand 
than  is  found  necessary  to  meet  the  requirements  of  a  sound 


I 


'*.' 

¥ 


n 


currency— all  beyond  that  is  waste,  idle  capital,  as  utterly 
useless  to  commerce  as  a  deposit  of  pavement  stones.  Second, 
it  is  not  proposed  to  establish  a  Bank,  as  in  England,  or  any 
department  of  such  an  institution,  but  rather  to  create  a  Cur- 
rency Bureau  or  Commission  ;  not  to  supply  discounts,  or  to 
take  deposits,  but  to  furnish  circulating  notes  for  the  whole 
United  States,  redeemable  in  coin.  Tliis  one,  simple  tiling 
we  covet,  neither  more  nor  less.  No  Bank  would  have  an 
exceptional  right  to  lean  u])on  the  Bureau  for  relief  in  a  panic, 
but  with  U.  S.  Bonds  in  hand,  it  could  always  exchange  them 
for  circulating  notes.  Especially  ought  Savings  Banks  to 
have  thf  right  to  present  any  of  their  U.  S.  Bonds  to  the 
Currency  Bureau  and  obtain  for  them  currency,  with  whi(!h 
to  pay  their  dep(^sits.  The  importance  of  this  provision  can 
hardly  be  over-e&timated.  W/th  suck  a  right,  no  properly 
conducted  Savings  Bank  could  ever  fail ;  without  it,  alri%ost 
any  one  might  fail,  in  a  panic  among  that  class  of  deposi- 
tors !  The  deposits  of  the  158  Savings  Banks  in  the  State 
of  New  York,  now  exceed  three  hundred  million  dollars  ! 
The  unparalleled  increase  >f  $204, 109,794  within  the  last  ten 
years,  is  an  infallible  index  of  general  prosptn'ity.  For  here 
are  laid  up,  iV)r  future  use,  actual  profits,  the  savings  of 
labor  and  careful  economy. 

Trust  Companies,  too,  under  certain  circumstances,  may 
find  it  very  desirable  to  avail  themselves  of  the  privilege  of 
converting  their  United  States  Bonds  into  currency. 

Still,  Banks  then,  as  now,  from  injudicious  cn»dits,  or  ex- 
panded discounts,  might  fail.  But  the  U.  S.  Currency  must 
remain  solid,  safe,  intact,  exchangeable  always  into  bonds, 
or  convertible  into  specie,  but  good  for  a  hundred  cents  on  the 
dollar  under  any  conceivable  circumstances.  These  are 
some  of  the  advantages  we  claim  for  our  new  currency 
over  any  hank  circulation. 

And,  while  no  individual  Bank  could  legally  claim 
the  right  to  borrow  circulating  notes  whenever  it  chose  to 
apply  for  them,  yet  the  Currency  Bureau  should  possess 
the  power  to  extend  relief  in  a  commercial  crisis,  on  satis- 
factory security  in  a  way  not  unlike  that  now  practised  by 
the  Issue  Department  of  the  Bank  of  England.  That  being 
the  only  known,  efficient  method  of  nipping  a  panic  in  the 


19 


bud.  But  strange  to  say,  with  this  knowledge,  President 
Grant  and  Secretary  Ricliardson,  refused,  in  the  panic  of 
1873,  to  deposit  temporarily  15  or  20  millions  currency  with 
the  New  York  City  Banks— although  virtually  the  same  in- 
stitutions, in  1861,  to  prosecute  the  war,  lent  the  U.  S.  Gov- 
ernment, (without  authority  of  law,)  more  than  twice  that 
amount  of  spe(;ie  on  U.  S.  paper  promises. 

As  to  the  amount  of  circulation  required  to  transact  the 
business  of  our  widcdy  exU^ided  country,  we  are  not 
altogether  in  the  dark. 

In  my  letter  to  Senacor  Sherman  (under  head  5),  I  dis- 
cussed this  point  at  some  length.  A  close  examination  of  the 
panic  of  the  fall  of  1873,  sheds  additional  light,  however,  on 
the  question.  Then,  the  aggregate  quantity  of  circulation 
was  set  down  at  800  millions — about  equally  divided  between 
legal-tender  and  National  Bank  notes.  It  is  now  quite  evi- 
dent, from  the  record  of  the  operations  of  September  and 
October,  1878,  that  800  millions  were  not  only  not  too  much, 
but  certainly  too  little  for  the  emergency.  As  proof  of  this, 
early  in  September  gold  was  at  a  premium  of  1 6  per  cent. ;  be- 
tween that  time  and  the  llth  October  it  fell  to  8^  per  cent, 
about  half!  While  currency — the  well-abused,  scandalous 
currency — during  that  six  weeks,  rose  in  the  market,  and  sold 
at  from  103|  to  104 — four  per  cent,  above  nominal  par  !  If, 
this  does  not  show  that  more  paper,  rather  than  more  gold  was , 
wanted  to  relieve  the  extraordinary  pressure,  then  figures  go  I 
for  nothing  I  Mills  stopped,  for  want  of  currency,  in  cases 
where  owners  were  worth  millions;  railroads,  coal  mines, 
and  all  sorts  of  manufactories  found  it  difficult  to  get  currency 
to  pay  their  hands.  Later,  it  is  true,  the  scarcity  alarmed 
persons  who  had  notes  to  pay,  and  they  locked  up  in  their 
safes  currency  to  meet  their  indebtedness.  But  the  over- 
whelming demand  was  from  the  West.  Sight  drafts  on  this 
City  against  grain  shipped,  amounted,  at  one  time,  to  a 
million  of  dollars  a  day.  The  crop  was  large,  foreign 
der.iand  good,  farmers  anxious  to  realize,  Europe  ready  to 
buy,  at  full  prices,  and  hence  the  heavy  shipments  with  un- 
precedented drafts.  At  the  rate  of  a  million  a  day,  a  single 
month  would  take  out  of  the  city  twenty-five  millions. 


&• 


20 


True,  the  cheap  money  of  the  preceding  hu miner,  to  this 
amount,  or  more,  had  been  hhined  to  HroktTsand  otlierHon 
call,  but  when  the  call  camr,  tiie  curren<\y  had  been  sent 
away,  the  (U'btors  could  not  pay  -the  bank  vaults  were 
emptied  of  the  (uirrency  they  relied  uj)on.  No  such  y>rovision 
had  been  made  as  the  new  plan  contemplates,  by  taking  up 
currency  in  summer  to  su})ply  the  autumn  demand. 

Th<>  panic  of  1873  occurred  under 'somewhat  remarkable 
circumstances.  Our  foreign  trade  was  tho  ight  to  l)e  in  our 
favor.  We  were  importing  specie  at  that  very  time,  but 
that  afforded  no  relief;  in  fact,  was  regarded  by  even  BuU- 
ionists  with  disfavor.  What  the  public  hunge^red  and 
thirsted  for  was  greenbacks,  or  even  bank  bills,  but  no  more 
of  these  could  be  had,  they  had  emigrated— gone  West. 

I  have  alluded  to  one  consideration  in  calculating  how 
much  currency  we  need,  which  1  take  the  liberty,  d(»ar  sir,  of 
referring  to  again,  and  that  is  this  :  In  the  (estimate  of  how 
much  paper-currency  can  be  maintained  at  par  with  gold, 
under  ^he  new  plan,  bear  in  mind,  that  there  would  be  no 
deposits  liable  to  be  withdrawn — no  more  than  there  are  in 
the  Issue  Department  of  the  Bank  of  England — indeed,  the 
exposure  of  the  Bureau  to  unlooked  for  vaWs  would  be  less 
than  in  the  case  of  the  Bank,  because  of  its  absolute  divorce 
from  all  Banks  of  discount  and  de})osit,  which  the  Issue 
De~)artment  of  the  Bank  is  not,  as  it  is  a  branch  of  the  same 
institution.  That  element  of  deposits  has  always  been,  and 
ever  must  be,  the  bane  of  specie  payments  by  Banks,  which 
embrace  in  specie  obligations,  both  deposits  and  circulation. 
Under  the  new  scheme,  only  notes  in  commercial  or  personal 
use  by  individuals  or  corporations,  could  be  presented  for 
redemption  ;  and  such  notes  would  always  be  of  precisely 
the  same  intrinsic  value  as  gold,  because  redeemable  in 
specie.  •  .  ■. 

In  my  lettei-  to  Senator  Sherman,  I  suggested  not  only 
the  withdrawal  of  all  National  Bank  notes,  but  the  substi- 
tution therefor  of  an  equal  amount  of  U.  S.  coin  notes, 
redeemable  in  specie  at  the  option  of  the  holder.  I 
likewise  provided  for  the  purchase  of  some  400  million  U. 
S.  bonds  (now  lodged  in  W^ashington  to  secure  the  Bank 
notes,)  at  the  market  price  of  such  bonds.     I  also  recom- 


I 


91 

mended  an  oxfhange  of  Uio  t)re9ent  legal-tenders  for  the  new 
II.  S.  coin  nott'rt  -  (tli<'  legal-tendern  and  bank  notes— about 
400  millions  each) — in  all,  800  millions.  1  tlius  stattnl,  the 
profits  to  the  people— deducting  loO  millions  of  specie  to  be 
kept  on  hand — would  leave  a  net  balance  of  (550  millions  ; 
the  interest  on  which  at  0  pvv  c(mt.  would  yield  annually  HO 
millions   -and  lessen  the  taxes  that  amount. 

I  now  propose,  in  addition  to  the  150  million  specie,  to 
k(^ep  on  hand,  the  400  millions  of  bonds,  purchased  of  the 
National  Banks,  to  be  held  as  a  special  reserve,  or  collateral 
security,  for  the  circulating  notes.  This  sum,  of  550  millions, 
would  secure  the  800  millions  beyond  a  j)erad venture.  For, 
if  the  specie  balance,  by  reason  of  panic,  or  from  other  cause, 
should  fall  below  what  might  be  regarded  as  the  minimum 
point  of  safety,  these  bonds  could  ha  us<.^d  to  restore  it  to 
the  required  amount,  without  interference  either  with  the 
Mnancial  resources  of  Government  or  the  discounts  of 
Banks.  This  is  very  important.  For,  besides  the  direct 
obligation  of  the  U.  S.,  the  note  holders  will  have  this 
special  collateral  security.  Moreover,  the  ol).jection  s'^me- 
times  urged  against  trusting  Congress  with  so  much  power, 
has  no  force  wliatever,  for  Congress  possesses  and  exerci^e8 
plenary  power  already  over  the  whole  subject,  by  virtue  of 
the  fundamental  law  of  the  land.  The  Constitution  of  the 
United  States,  Section  8,  provides  that  Congress  "shall 
have  power  to  coin  money,  regulate  the  value  thereof,  and 
of  foreign  coin,  and  hx  the  standard  of  weights  and. 
measures  ;"  while  Section  10,  reads  as  follows  :  "  No  State 
shall  enter  into  any  treaty  of  alliance  or  confederation  ; 
grant  letters  of  marque  and  reprisals  ;  coin  money  ;  emit 
bills  of  credit;  make  anything  but  gold  and  silver  coin  a 
tender  in  payment  of  debts." 

It  does  not,  however,  say  that  Congress  may  not  do  all 
the  things  thus  inhibited  to  States,  but,  inferentially,  that 
it  may,  that  it  must,  perform  every  right  that  is  an  essential 
function  of  Government  or  it  would  not  be  performed  at 
:iU.  If  then  no  state  is  allowed  to  declare  .vhat  shall  con- 
stitute money,  it  is  because  the  framers  of  the  Constitution 
intended  to  reserve  that  power  to  Congress — to  the  repre- 
sentative authority  of  all  the  States. 


Does  it  not  follow  then,  that  Congress  only  can  aay  what 
shall  be  a  tenier  in  payment  of  debts? 

A  few  words  as  to  the  disposition  of  the  income  from  the 
purchased  bonds.  Snj)po8e  the  interest  to  be  at  the  rate  of 
6  percent.,  payable  semi  annually,  on  the  400  millions,  this 
would  yield  20  millions  yearly.  Assuming  the  National 
debt  to  be  $2,()()(),(K)(),()()(),  the  conversion  of  this  interest  into 
a  sir\king  fund,  would  pay  the  entire  debt,  a(!Cording  to 
Professor  Bartlett's  iigures,  in  28iVo\  years,  or  about  28^ 
years. 

Or,  better  still,  dongnvss  might  pref(;r  to  make  the  interest 
cumulative  ;  thus  adding  every  year,  or  half  year,  to  this  400 
million  reserve,  and  so  increasing  thf  security.  In  that 
manner  the  collateral  fund  would  be  enlargt^d,  to  meet  the 
necessary  increase  in  the  volume  of  notes  that  must  in- 
evitably be  required  by  the  growing  wants  of  a  constantly 
increasing  business  and  a  larger  and  larger  population. 

I  owe  you  many  apologies,  dear  sir,  for  this  long,  long 
letter.  I  feel  so  desirous  that  our  (rovernment  should  take 
wise  action  in  regard  to  this  vital  subject,  that  I  fear  I  may 
have  exi)osed  my  own  want  of  wisdom  in  so  taxing  your 
time,  and,  most  likely,  exhausting  your  patience. 


I  am, 


Most  resp«ictfully, 

And  truly  yours, 

J.  E.  WILLIAMS. 


-'•fkm^mtntm 


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